Weak domestic grain market drives prospects for UK exports

Lacklustre demand for grain in the UK, combined with a weaker pound means merchants are looking further afield for market outlets.

Lower UK prices have certainly made UK wheat and barley more export competitive, and midweek, the £1 was worth €1.13.

Europe is providing the most opportunities, and typically about 90% of UK wheat exports are shipped there, based on data for the past five years.

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Simon Wilcox, Cefetra farm grain origination manager, said the UK has started to look more competitive again for exports, and that was allowing merchants to do more business overseas.

Mr Wilcox said: “It’s incredibly quiet domestically – consumers are fully covered, markets are probably quieter generally and the demand isn’t there.

As such, we need the export markets to come together and that’s why the prices adjust to get that right.”

Export destinations

Spain, Portugal and the Netherlands are some of the major European destinations for UK grain, according to Mr Wilcox.

Mainland Europe is where the volumes are most likely to go for the smaller vessels, but there have been larger vessels going further afield, with Cefetra sending a shipment of feed wheat and feed barley from Ipswich to Iceland earlier this week.

Ex-farm feed wheat spot prices collected by Farmers Weekly averaged £217.65/t on 1 March, dropping by £6/t on week-earlier levels.

Feed barley averaged £194.83/t, a discount of almost £23/t to feed wheat.

May 2023 UK feed wheat futures have fallen by almost £20/t since mid-February and ended the month at £225.50/t.

On Tuesday 28 February, new crop (November 2023 futures) closed at a £2.50/t premium to old crop (May 2023).

Millie Askew, AHDB lead analyst, said: “Old-crop prices have been weighed on by the very competitive supply of Russian wheat that has been flooding the export market.”

Market drivers

The Black Sea grain export deal is due to expire on 19 March. Although an extension is likely to be granted, until the terms are agreed this will continue to influence market sentiment and add some volatility to global trade.

US wheat futures markets have faced selling pressures recently, with expectations for a larger 2023-24 crop, according to Frontier.

In the longer term, adverse weather in South America, such as drought in Argentina, is set to affect production, while in India a large wheat crop is forecast for the coming season.